Defence Minister Peter MacKay checks out the cockpit of the F-35 Joint Strike Fighter after the Conservative government announced its intention to purchase 65 of the next-generation planes at an Ottawa news conference on July 16, 2010. (Adrian Wyld/The Canadian Press)

Defence Minister Peter MacKay checks out the cockpit of the F-35 Joint Strike Fighter after the Conservative government announced its intention to purchase 65 of the next-generation planes at an Ottawa news conference on July 16, 2010.(Adrian Wyld/The Canadian Press)

The Harper government is embarking on an ambitious effort to develop a Canada-first military purchasing strategy – one that aims to funnel as many procurement dollars as possible to domestic firms with the potential to be leaders in their field.

It is the latest step in the Conservatives’ plans to craft a defence industrial policy for Canada – an effort to harness the power of the military-security budget in the service of long-term jobs and economic growth.

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The Conservatives are facing claims by the parliamentary budget officer that the government misled Canadians on the cost of the F-35 fighter jet program. Defence Minister Peter MacKay denies anything was hidden.
The Canadian Press

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This week, the government will announce it is tapping high-tech luminary Tom Jenkins, executive chairman of OpenText Corp., to help assemble a plan for what has been called “strategic procurement.” He’ll serve as special adviser to Public Works Minister Rona Ambrose to help Ottawa identify key industrial capabilities it wants to support and develop.

Over the past 30 years, Canada has shied away from using defence policy to promote and build domestic industries. In the case of major equipment buys, for instance, it has often relied on foreign contractors to share work with domestic firms in exchange for winning the job.

But relying on non-Canadians to spin off industrial and regional benefits has had mixed results; in the worst case, government officials joke, Canadians are left to build the air hangar for planes or supply the fuel to fill a vehicle’s gas tank.

Ottawa’s not planning to spurn foreign suppliers. But it wants to be smarter about backing Canadian industry where possible – funnelling more of the $240-billion the government plans to spend over 20 years on military acquisitions to domestic suppliers. This new procurement strategy got the nod from federal policy makers in the 2011 and 2012 budgets.

There are several ways Ottawa can help Canadian companies.

It could start by contracting out more of the billions of dollars of research and development the federal government conducts in-house. It can set aside more contracts for small- and medium-sized Canadian businesses.

It can design major defence procurements to ensure promising Canadian companies get work that helps them develop innovative new products and find a commercial market for innovations.

For instance, flight simulators and munitions – bombs and bullets – are two areas where Canadian companies have become strong international competitors in the defence and security markets.

Ottawa wants to nurture more companies that can become the next CAE Inc. or General Dynamics Ordnance and Tactical Systems Canada.

This new approach, which Ms. Ambrose has championed throughout government, has its risks and its critics. Some Department of National Defence officials worry it will end up adding costs and delays to military spending. Others in the Industry department feel the current system of extracting spinoff contracts from foreign suppliers is adequate.

Over the past five years, though, the Harper government has become more focused on protecting and fostering a home-grown expertise in defence and security technology. It is an evolution in thinking for the Conservatives, who have tempered their laissez-faire approach to business since they took office.

In 2008, for instance, the Tories blocked the sale of MacDonald Dettwiler and Associates Ltd.’s space technology division to Minneapolis-based Alliant Techsystems Inc., saying the unit was of strategic interest to Canada.

In 2011, the Tories unveiled a 30-year plan to build the next generation of military and government research vessels in Canada, a long-term commitment to support jobs and talent in shipyards on both the East Coast and West Coast.

Ottawa’s been advised to adopt a Canada-first procurement strategy as a means of levelling the playing field for Canadian companies who find themselves competing globally for business against foreign firms that enjoy strong and steady support from their respective governments.

An expert panel on business innovation, chaired by Mr. Jenkins, urged the Tories in late 2011 to emulate the Americans.

“The use of procurement to stimulate innovation has been a long-standing practice in other countries, particularly the U.S. with its enormous defence expenditures,” the 2011 report said.